Everybody may not know your name, but you definitely want to start with a bank where you already have a solid banking history if you plan to apply for a small business loan. You also want to make sure your bank has small business bankers or small business specialists on board as well as the bank products that meet the needs of your business.
Generally, most business owners already have a bank relationship established in terms of a personal relationship. So, if you already have a credit card with that bank, a lender can see how well you manage your account and your finances.
“You are not tied to that bank if they do not have a robust enough product or they can’t meet your business needs,” says Michelle Y. Lee, executive vice president and Northeast Regional President of Wells Fargo. In that case, “Look elsewhere. You may want to move your personal relationship to another bank as well. All of this benefits you in the long run—the more business you bring to that bank.”
Lee is responsible for more than 460 branches, nine business banking teams, approximately 5,500 team members, and about $100 million in revenue. What do bankers look for particularly in today’s environment when deciding whether or not to approve a loan request?
Here are five takeaways that Lee shared with BlackEnterprise.com:
1. The perfect credit profile for the business owner personally and the credit profile of the business if it is already established. “It tells the bank a lot about that person. It tells them beyond what your payment history is like. The credit profile provides a lot of insight in terms of how you run your business and how you have built your banking relationship,” says Lee. It also will give some insight into the types of challenges that you have had and insight into what your credit needs.
2. Positive feedback from vendors or your customers is vital. “You want to be in a position where suppliers speak very favorably about making your payments on time. Or you want your customers to speak positively about your timely delivery of products or services,” says Lee. When applying for a loan, provide your banker written testimonials from suppliers and customers.
3. Your social media presence is something that some bankers are paying attention to, which may come as a surprise. So, it is important that you monitor what you say and what others say about you. What are your customers tweeting or posting about your company? What is the general public perception of you and that of your business?
“You have to conduct your business in a way where you are getting positive feedback,” Lee says. “It is so easy for people to weigh in on their impression of your business, the services that you provide, or the products that you sell.”
4. Attending bank-sponsored local events can help raise your profile. Also, invite your small business banker to your place of business on a regular basis. “Giving tours is a way for your banker to learn about the business and its founders,” explains Lee. “This is all a part of relationship management which is part of the job for the small business banker.”
5. Keeping your banker up to date. At least every six months or three times a year you should be talking to your banker about the business and your industry. The more your banker understands about your business the more they can help you. Adds Lee, “You don’t want someone who is just an order taker, you want someone who is an adviser who is going to consult with you and recommend solutions for you that you may not know you need.”
Lee says common mistakes that business owners make are applying for a line of credit or a loan when they really are unable to service the debt. “Or you are looking for too large of a loan.” Also, “organization is really key,” she adds. “You need to be able to put your hands on great records and all of the required documents that you will need to get a loan.”